The future of financial services – a pragmatic outlook
The future of the financial services industry promises to be a tumultuous and transformative one, as firms struggle to placate their extremely polarized customer demographics.
Younger customers who grew up as ‘digital natives’, prioritize getting the most efficient and convenient service, and have no problem switching providers if it means getting a slightly better one.
For older customers however, hard-baked habits – such as visiting their local branch – are integral to their banking experience.
So, many financial institutions find themselves pulled in two directions, scrambling to provide services that span these demographics simultaneously.
And in the backdrop of this tug-of-war has been continuous and exponential technological innovation. New capabilities are constantly pushing companies – and society as a whole – in new, exciting and unknown directions.
So, as we approach the milestone year of 2020, in this blog post we’ll consider some of the challenges and changes traditional financial service providers can expect to contend with over the next five years.
Legacy to contemporary
As our world becomes more digital, financial institutions now not only have to protect physical assets, but digital ones too – such as highly personal information.
And while they’ve had a few hundred years to practice the former, the long list of data breaches banks and insurers have fallen prey to shows they haven’t perfected the latter yet.
A lot of traditional finance companies are burdened with legacy technology that can be up to half a century old, which makes integrating their systems with brand new ways of working a challenge.
In a recent survey we conducted, 75% of workers in financial services said they experience major service outages at least weekly. And 60% of respondents said they weren’t very confident in their organization’s ability to protect data in a robust and effective way.
So, this need to evolve security and improve the industry’s image has spurred on two key changes – a focus on customer and ‘digital employee’ experiences.
Modern customers now judge services by their overall experience. So, more than just being secure, financial institutions need to also be accessible and offer a variety of personalized services, lest customers find better alternatives.
Likewise, as companies shift towards becoming ‘data businesses’, competition for software developers and data scientists has grown fierce.
But 43% of workers say their current workplace environment has a negative or neutral impact on their ability to attract and retain talent.
So, creating better workplace experiences should be a priority for every financial institution.
And while technology has a large role to play in this, a lot of these issues are rooted in cultural changes that’ll need to be initiated by leadership.
A peek into the future
As it stands, I don’t expect the bulk of devices that customers use to change much over the next five years. For example, mobile banking will continue to ramp up, with application functionalities merely expanding.
However, technology will play a large role in enabling financial services workers to do their jobs better. We’ll see the rise of ‘co-bots’ – voice-integrated machines capable of performing the more standardized processes which are done manually today.
Nine out of 10 respondents believe AI will have a positive impact on personal productivity. So, as AI takes over a lot of communication services and chatbots will become more trusted by the public. They’ll free up human workers to focus on more creative and empathetic tasks, boosting productivity, and engagement.
‘Smart ATMs’ capable of more functionalities, such as video chat, will also grow in popularity as part of a digital transformation shift. These, along with biometric verification methods such as face recognition, will reduce the need to go to a physical branch substantially, with up to 95% of banking services accessible online.
But that doesn’t mean branches will disappear altogether. I envision they will maintain a significant presence, transforming into experience providers, maybe even sharing space with other businesses such as coffee shops or retailers.
A human-centric future
Even regulators are set to digitally transform with AI and automation being introduced to ease reporting burdens. These cost the UK anywhere between two to four billion pounds every in running costs alone.
But, while its very easy to look at technology as the cache all answer to the future of finance, the reality is it will still largely just be people at their desks or in their homes interacting with each other and manipulating data.
And even as the ways they manipulate data changes, evolves and improves, a focus on human experiences is still the smartest play any financial services company can make.
Download our report for more information into the future of financial services.